System and method for designing and administering survivor benefit plans

ABSTRACT

A computer-implemented system and method for designing and administering self-funded survivor benefit plans is disclosed. The system includes a specific purpose computer programmed with several computer software modules that enable the system to carry out the method disclosed. The system also includes at least one investment vehicle, such as a trust fund, that holds the employer/employee contributions to the plan, manages the investments of the plan and may also purchase and manage insurance contracts on certain high-risk and other employees to limit the liability and tax exposure of the plan. The computer software modules include a data import module for importing employer/employee data into a database that is also part of the system, a benefit plan design and costing module for modeling and optimizing the survivor benefit plan, an enrollment and administration module to manage the ongoing operation of the plan, and several other ancillary modules.

BACKGROUND OF THE INVENTION

[0001] The present invention is directed toward the field ofcomputer-implemented employee benefit plans. In particular, a system andmethod for designing and administering a self-funded survivor benefitplan is disclosed. This system and method are implemented in aspecific-purpose computer system operating software (“the survivorbenefit plan software”) that carries out the functions disclosed in thisapplication. Along with the specific-purpose computer system operatingthe survivor benefit plan software, the system includes an investmentvehicle, such as a trust fund, which is used to maintain sufficientassets in order to meet the liabilities of the survivor benefit plan onan ongoing basis. The novel computer system and software are used todesign and implement an employer-specific survivor benefit plan, andthen to manage the ongoing administration of the plan, thereby removingthis administrative burden from the employer.

[0002] A survivor benefit plan is an employee benefit, sponsored by theemployer, which provides the employee's designated survivor(s), such asa spouse, children, etc., with a predetermined periodic income stream inthe event that the employee dies while a participant in the plan. Thistype of plan is very attractive to employees because it provides acertain income stream to the designated beneficiaries without theinvestment problems attendant with a lump-sum payout, thereby ensuring astable income to the beneficiaries over a period of time.

[0003] Individual employees have always been able to provide their ownsurvivor benefit plans. However, there are several disadvantages to thistype of single-employee plan as compared to an employer-sponsored groupplan. The individual plan is much more costly than theemployer-sponsored group plan, due primarily to setup and insurancecosts, as well as fees to trustees and other individuals involved inmanaging the plan. It is simply not feasible, from a cost standpoint,for all but the higher compensated individuals to setup and operatetheir own survivor benefit plans. Therefore, a group plan, sponsored bythe employer, is the most likely vehicle for employees to obtainsurvivor benefits for their designated beneficiaries.

[0004] Prior art survivor benefit plans typically consisted ofinsurance-based plans. In these types of prior art plans, the employercontacted an insurance company in order to provide the survivor benefit.The insurance company was provided some information on the employeedemographics and salary levels, and then presented the employer with astatic set of plan choices. The insurance company calculated theestimated liabilities created by the plan and then computed a premiumvalue to be paid by the employer or employees, which also provided forthe insurance companies profit for taking on the risk associated withthe plan.

[0005] This type of prior art insurance-based plan has manydisadvantages: (1) it is inflexible, in that the employer is typicallyprovided with a static set of benefit choices for the plan and cannoteasily custom-design its own plan; (2) it is more costly than aself-funded plan, as disclosed in the present application, because ofthe margins necessary to compensate for the uncertainty associated withthe risk underwritten by the insurance company, and because of theinsurance company's profit; (3) the insurance company plans typically donot provide integration of benefits, in which the survivor incomebenefit generated by the plan is offset by other employer-selectedbenefits; (4) the employer must maintain detailed records and data oneach employee's benefit level, designated beneficiaries, etc; (5) anygains on investments made using the insurance premiums paid by theemployer or employees inure to the insurance company, not to the plan;and (6) the insurance plan usually bears much greater tax burdencompared to a self-funded plan. These are just some of the numerousproblems that exist in the prior art.

[0006] Therefore, there remains a need in this art for acomputer-implemented system and method for designing employer-specificsurvivor benefit plans.

[0007] There remains a more particular need for such a system and methodthat manages the ongoing administration of the plan, so that theemployer need not deploy scarce human resources to the plan'smanagement.

[0008] There remains an additional need for a self-funded survivorbenefits system that includes a computer system, specific softwaremodules for operating the computer system, and an investment vehicle forholding the assets of the survivor benefit plan on behalf of theemployee-designated survivor(s).

[0009] There remains another need in this art for such a system thatidentifies certain high-earning employees as high-risk to the plan anddetermines the amount of insurance for the plan to purchase in order tomitigate the effect of one such high-earning employee dying and therebycreating a large liability for the plan. An employee is “high-risk” whenthe calculated survivor income benefit and resulting plan liabilityexceed a predetermined risk tolerance provided by the employer.High-risk employees create large liabilities for the plan if they die,and therefore it is usually desirable to protect the plan from suchliabilities.

[0010] There remains a more particular need for such a system that ismore cost effective than the prior art insurance-based plans, and whichprovides a level of customization and flexibility in the design of thespecific employer's plan that is unknown in the prior art.

[0011] There remains yet another need in this art for a computer systemthat is capable of designing and managing self-funded employer-sponsoredsurvivor benefit plans that enable flexible funding and that are costeffective. Such a system should be able to design a specific employerplan based on the employer's specific parameters as to how the planshould operate, the employer's other benefits to be integrated, and ondata specific to each employee covered by the plan. In designing theplan, it would be desirable for the system to be able to create afinancial model of the plan, taking into account the employerparameters, desired benefit integration, predetermined funding level andemployee data. The financial model should be created by performingdetailed calculations to arrive at a contribution level for the employerand/or employees that meet or exceed the predetermined funding levelspecified by the employer as applied to the expected liabilities in aparticular year.

[0012] There remains an additional need for such a computer system thatis capable of periodically remodeling the entire benefits plan andrecalculating specific contribution levels in order to ensure that theplan is properly funded on an ongoing basis.

[0013] There remains yet another need for such a computer system that iscapable of providing numerous detailed reports on the status of the planfor use by the employer, taxing authorities and/or other individualsassociated with the survivor benefit plan.

[0014] Finally, there remains an additional need for such a computersystem that, over time, can accumulate mortality statistics on aparticular employer, and can then remodel the survivor benefit plan inorder to account for the employer-specific mortality data, therebyproviding a more accurate estimate of the costs and liabilities of theplan.

SUMMARY OF THE INVENTION

[0015] The present invention overcomes the problems noted above andsatisfies the needs in this field for a computer-implemented system andmethod for designing and managing self-funded survivor benefit plans.The system includes a computer system, a survivor benefit softwareprogram, comprising several software modules, and an investment vehicle,such as a trust fund. Users of the system include the employer who issponsoring the plan, the employees who are enrolled in the plan, theemployee-designated beneficiaries who benefit from the proceeds of theplan, a plan trustee who administers the operation of the investmentvehicle, a plan actuary who annually assesses the financial status ofthe plan, and system operators that design, implement and manage theongoing administration of the plan using the specific-purpose computeroperating the survivor benefits software program detailed below.

[0016] The survivor benefit software program includes a data importmodule (the “DIM”), a survivor benefit program database (the “SBPDatabase”), a benefit plan design and costing module (the “BPDCM”), anenrollment and administration module (the “EAM”), a word-processingmodule (the “WPM”), and a monthly payment module (the “MPM”.) Together,these modules enable the functionality of the present invention. Thedetailed functionality of each module is described more fully below. Ingeneral terms, however, the DIM is used to collect certain employer andemployee data and to convert the data into a particular format that iscompatible with the SBP Database, and to store that certain informationinto records in the database. The SBP Database is used to store all ofthe employer and employee specific information that is used by the othermodules to design, implement and manage the survivor benefit plan. TheBPDCM is used to design, model, calculate and generate the specificemployer survivor benefit plan. The EAM is used to implement the planand manage the ongoing administration thereof. The WPM is used togenerate enrollment forms and other printed materials for use in planimplementation. And the MPM is used to provide periodic payments todesignated beneficiaries when an employee death occurs.

[0017] Because the present invention is self-funded, instead ofinsurance-based, the long-term costs associated with a survivor benefitplan created by the invention are generally much lower than the priorart insurance-based plans. In addition, the functionality of the BPDCMenables the employer to design a flexible plan that precisely matchesthe desires of the employer, and which can be altered as needed if theemployer's desires for the plan change. This level of flexibility is notgenerally available with the prior art insurance-based plans.

[0018] The system of the present invention includes: a database forstoring employer and employee data relevant to the design of thesurvivor benefit plan; a benefit plan design and costing module forgenerating a model of the survivor benefit plan using the employer andemployee data in the database, the model including calculations ofsurvivor income benefit levels for each employee-designated beneficiary,and of required contribution levels on the part of the employer and/oremployees in order to fully fund the expected plan liabilities to apredetermined level; an enrollment and administration module forimplementing the plan and for administering the contribution levelsrequired by the employer and/or employees and the periodic payout ofsurvivor income benefits from the plan; and an investment vehicle forholding, investing, and accounting for the employer and/or employeecontributions and for disbursing the periodic survivor income benefitpayments to the employee-designated beneficiaries. The benefit plandesign and costing module is also for generating numerous plan reportsfor use by the employer, the employees, the manager of the investmentvehicle, the plan actuary, and others. In addition, the benefit plandesign and costing module is for determining whether certain employeescovered by the plan are “high risks” and if so, for generating insurancedata for integration into plan reports for use by the manager of theinvestment vehicle in order to purchase and manage insurance on thehigh-risk individuals, thereby mitigating the risk to the plan.

[0019] The enrollment and administration module implements the plan bydownloading certain calculations from the benefit plan design andcosting module and also downloading data from the database in order togenerate enrollment forms to be completed by the employees. Thecompleted enrollment forms are then entered into the database using acomputer-implemented data import module. The enrollment andadministration module also implements the plan by notifying theemployer's payroll department of the required employer and/or employeecontributions so that these sums can be withheld from the employee'spaycheck and transferred, electronically, to the investment vehicle.This module then receives notification of a covered employee's deathfrom the employer, calculates the survivor income benefit to be paid andthe payment period for this particular employee-designated survivor, andtransfers this information to a computer-implemented monthly paymentmodule that provides the payments to the designated survivor(s).

[0020] The system of the present invention also may include a mortalitydatabase. The mortality database stores specific mortality data on theemployer's employees, and is used by the benefit plan design and costingmodule to design a more accurate model of the survivor benefit plan. Thesystem also includes a means for recalculating or remodeling the entiresurvivor benefit plan on a periodic basis, in order to provide anongoing accurate forecast of the expected survivor income benefitliabilities to be paid and the corresponding employer/employeecontributions that are required to fund the plan to the predeterminedlevel.

[0021] One method of the present invention includes the steps of: (a)providing a computer system for executing the method, the computersystem having a database; (b) storing employee and survivor informationin the database and calculating a survivor income benefit and a paymentperiod; (c) calculating the present value (“PV”) of the amount in step(b); (d) identifying all other employer provided benefits andcalculating the PV of these benefits; (e) calculating the differencebetween (d) and (c) to arrive at a net survivor income benefit to beprovided; (f) determining the PV of certain investment assets of theplan that yield a particular cash-flow; (g) providing data from thesystem so that sufficient investment assets can be purchased to meet theprojected benefits required by the plan and determiningemployer/employee contribution levels to acquire the assets; and (h)making periodic payments to the survivors when a particular employeedies. Steps (a)-(g) generally correspond to the process carried out bythe BPDCM. Step (h) is carried out by the EAM in concert with the MPM.The method also includes the steps of: (i) redetermining (orredesigning) on a periodic basis the various plan parameters, benefitlevels, contributions, etc. and (j) continuing the period payments tothe survivors.

[0022] Another method according to the present invention includes thecomputer-implemented steps of: (1) importing employer and employee datainto a database; (2) designing a survivor benefit plan using this data,wherein the design includes calculations of: survivor income benefitlevels for each employee's designated survivor(s), the expected annualliabilities of the plan, and the required contribution levels to fundthe expected annual liabilities to a predetermined level; (3)implementing the plan by providing enrollment letters to the employeesand receiving and importing the completed forms; (4) notifying theemployer of the contribution levels for the covered employees; (5)transferring contributions to a trust fund; and (6) receiving a deathnotification from the employer and providing a periodic payment streamto the employee's designated survivor(s) based on the designed survivorincome benefit level calculated in the designing step.

[0023] The present invention provides many advantages over the priorart. Foremost, it provides a computer-implemented system for designingand administering self-funded survivor benefit plans so that employerscan provide a survivor benefit to their employees without having topurchase programs from insurance companies that do not provide flexibleplan designs to the employer.

[0024] Additional advantages of the present invention include: (1) theability to integrate the survivor income benefit provided by the planwith other employer-related benefits; (2) the ability to actuariallymodel the survivor benefit plan based upon employer-specific planparameters and employee-specific data, thereby designing an optimal plandesign to meet the employer's specific objectives and at the same timeensuring that the plan is funded as intended; (3) generation of numerousplan reports based on the database of employer and employee data, and onthe modeling of the survivor benefit plan, in order to provide theemployer, employees, plan actuary, investment manager, etc., withvaluable information regarding the financial status of the plan; (4)providing an investment vehicle, such as a trust fund, to hold theemployer/employee contributions to the plan, the trust being able toinvest the contributions in a variety of investments, so that the gainsof the employer/employee contributions inure to the survivor benefitplan; (5) the optional provision of identifying particular employees ashigh-risk to the plan, if the particular employee were to die, andpurchasing insurance for those high-risk employees in order to protectthe survivor benefit plan from a large liability; (6) collecting dataover time on the mortality history of the employer and forming anemployer-specific mortality database, so that the modeling software ofthe present invention can remodel the plan design so as to account forthe actual mortality history of the specific employer; (7) the abilityto periodically recalculate and redesign the survivor benefit plan toaccount for changes in the employer parameters, the employee-specificdata, the actual employer mortality data, etc., and (8) automating theprocess of implementing and administering the survivor benefit plan sothat the employer need not be burdened with these functions.

[0025] These are just some of the many advantages provided by thepresent invention, described illustratively in more detail below. Aswill be appreciated, the invention is capable of other and differentembodiments, and its several details are capable of modification invarious respects, all without departing from the spirit of theinvention. Accordingly, the drawings and description of the preferredembodiment are to be regarded as illustrative in nature and notrestrictive.

BRIEF DESCRIPTION OF THE DRAWINGS

[0026] The present invention satisfies the needs remaining in this artand provides the advantages noted above, as well as many otheradvantages, as will become apparent from the following description whenread in conjunction with the accompanying drawings wherein:

[0027]FIG. 1 is a block diagram of a preferred embodiment of theSurvivor Benefit Program System (“SBP System”) of the present invention;

[0028]FIG. 2 is a flow chart detailing the functionality of thecomputer-implemented Benefit Plan Design and Costing Module (“BPDCM”)that is part of the SBP system; and

[0029]FIG. 3 is a flow chart detailing the functionality of thecomputer-implemented Enrollment and Administration Module (“EAM”) thatis part of the SBP system.

DETAILED DESCRIPTION OF THE DRAWINGS

[0030] Referring now to the drawings, FIG. 1 sets forth a block diagramof a preferred embodiment of the system of the present invention. Thesystem of FIG. 1 includes an employer 10 who is desirous of setting up aself-funded survivor benefit plan, the employer having a payrolldepartment 14, numerous employees 16, and a set of employer data 12,which is used in conjunction with the survivor benefit program (“SBP”)to design and implement the survivor benefit plan of the employer. Alongwith the employer 10 and employees 16, FIG. 1 includes several otherentities that may be part of the system, including the beneficiaries ordesignated survivor(s) 20, a trust fund 18, the trust fund having a plantrustee 40 and a plan actuary 42. Also set forth on FIG. 1 are optionallife insurance contracts 22, which may be purchased by the plan to covercertain high-risk employees, and/or mitigate certain tax consequences asdescribed in more detail below.

[0031] The functionality of the present invention is embodied in severalsoftware components operating on a computer platform. For those claimsappended to the end of this application that include means-plus-functionelements, the structure disclosed in support of these elements is theseveral software components described in more detail below. Thesecomponents include the data import module (or DIM) 44, the SurvivorBenefits Program Database (or SBP Database) 24, the Benefit Plan Designand Costing Module (or BPDCM) 26, the Enrollment and AdministrationModule (or EAM) 28, the Word Processing Module (or WPM) 32, and theMonthly Payment Module (or MPM) 34. These software components, ormodules, are preferably written in the COBOL programming language foroperation on a DOS-based computer system. Alternatively, however, thesecomponents could be written in other programming languages, such as C,C++, PASCAL, FORTRAN, VISUAL BASIC, PARADOX, or any other language thatis capable of providing the functionality described for each component.Each of the software modules shown in FIG. 1 could be a single computerprogram, or could be several distinct programs that provide thefunctionality for the module. In addition, although the preferredembodiment for these components is a DOS-based interface, the softwarecould operate on a Windows, UNIX MAC OS, or any other type of computeroperating system.

[0032] The preferred computer system for operating the various softwarecomponents listed above is an IBM-compatible personal computer system,with an Intel-type microprocessor, 16 MB of RAM a 500 MB hard disk driveto store system data, a display monitor, and a printer to generate theplan reports 30. Alternatively, other computer systems could be usedwith the present invention. For large employers, the most importantaspect of the computer system is disk space. Typically a record for asingle employee in the SBP Database requires about 12 KB of disk space.Thus, for a large employer the hard disk drive of the computer systemshould be quite large (i.e., 1 GB or higher) so as to store all of theemployer and employee information that is necessary to design andadminister the survivor benefit plan. Although not explicitly shown inFIG. 1, the computer system of the present invention operates thesoftware modules noted above, and stores the SBP Database 24.

[0033] The system of FIG. 1 operates as follows. The first step indesigning the survivor benefit plan for a specific employer 10 is toimport the employer's data and the corresponding employee data into theSBP Database 24 of the present system. This data is typically providedby the employer on electronic media, such as floppy disk or opticaldisk, but could, alternatively be electronically transmitted from theemployer 10 to the DIM 44 of the SBP system via modem or othercommunication device.

[0034] The employer/employee data 12 is imported into the SBP systemusing the DIM 44. The DIM 44 takes this data and converts it into ASCIIrecords of a common format for use by the other modules of the SBPsystem. The employee data typically includes the following information:employee name, address, gender, date of birth, date of hire, maritalstatus, social security number, base compensation, annual bonuspercentage, commissions, spouse's date of birth (if applicable), andemployee elections under other employer benefit plans. Other informationcould also be included in the employee data. The employer data typicallyincludes the following information: copies of the employer's otherbenefit plans, assumptions regarding salary increase scales, discountrates, mortality rates, annuity rates, marginal income tax rates,pension plan factors, expected investment yields (from moniescontributed and held in the trust fund), and specific data regardingemployer parameters for designing the survivor benefit plan. Otherinformation could also be included in the employer data.

[0035] These specific employer parameters are used to custom-design theplan, a feature that is not generally available with the prior artinsurance-based plans, and include data such as: classes of employeeseligible to participate, income replacement percentages, other employerprovided benefits to be used as offsets to the survivor income benefit,minimum benefit payment periods, disability provisions, predeterminedfunding level and risk tolerance. The “risk tolerance” is a measure ofthe level of risk that the employer or plan is wiling to accept forparticular “high-risk” employees that, because of their income level,have a large survivor income benefit and resulting benefit planliability if they die. The risk tolerance measure is used to optionallypurchase insurance products to protect the survivor benefit plan fromlarge liabilities created when a high-risk employee dies.

[0036] The SBP Database 24 can also be used to store anemployer-specific mortality database. Initially, if the employeepopulation is not of sufficient size, or no mortality data is availableon the employer's employee population, generic mortality tables must beused by the SBP system in order to estimate the mortality of theemployee population being covered. But, over time, the SBP systemcollects specific data on the employer when a death notification 52event occurs. By storing this data in the SBP Database 24, the SBPsystem can develop an employer-specific mortality table that can be usedto remodel the survivor benefit plan on a periodic basis and therebybetter estimate the periodic liabilities of the plan.

[0037] Once the initial employer/employee data 12 is imported into theSBP Database 24, a model of the specific employer plan is designed usingthe Benefit Plan Design and Costing Module (or BPDCM) 26. As describedin more detail below in FIG. 2, the BPDCM 26 is a software module thatis used to design a custom survivor benefit plan for the employer thatis self-insured and funded to a predetermined level as specified by theemployer. The predetermined funding level is preferably 100%, such thatthe plan is “fully funded”, but could, alternatively, be any other levelas specified by the employer, either less than 100% or greater. TheBPDCM 24 takes the employer/employee data 12 from the SBP Database 24and calculates a specific survivor income benefit per employee andconverts this calculation to a present value. Optionally, the BPDCMcalculates the present values of other employer-selected benefits (suchas pension survivor benefits, 401K, stock options, social security,etc.) to be used as an offset to the survivor income benefit andintegrates these offsets. Having arrived at a net-present value of thesurvivor income benefit for each employee, the BPDCM 26 then usesseveral assumptions concerning rates of return, mortality rates, etc.,in order to arrive at a contribution level for the employer and/oremployees in order to fund the plans expected liabilities to thepredetermined funding level. This calculation usually takes severaliterations in order to arrive at a contribution level that just exceedsthe expected liabilities multiplied by the predetermined funding levelfor the plan on an annual (or other periodic) basis.

[0038] Once a model of the survivor benefit plan has been generated, theBPDCM 26 creates numerous plan reports 30. These plan reports 30illustrate annual SBP contribution levels and benefits for eachemployee, and composite costs for the employer 10 and the plan 18. Thereports 30 also illustrate the names, ages, gender and present valueamounts for each employee whose survivor income benefit present valueexceeds the employer's risk tolerance. These reports 30 are used by theemployer 10 and the BPDCM 26 to determine whether insurance should bepurchased for the high-risk employees to protect the plan from largeliabilities. If it is decided that certain high-risk employees should becovered by insurance, then the BPDCM 26 calculates minimum and maximumannual premium costs for the high-risk employee and provides a planreport 30 to the trust plan 18, so that the plan trustee 40 (orinvestment manager) can procure insurance to protect the plan.

[0039] The BPDCM 26 is capable of generating numerous other reports 30describing any aspect of the plan's design, including theemployer/employee data 12, ongoing claims data, insurance information,plan model data, tax information, etc. The plan reports 30 are providedto the employer 10 so that it can determine whether the plan meets itsneeds, in terms of costs, benefit levels, risk tolerance, etc. At thispoint the employer 10 can change its input parameters and the entireplan can be remodeled by the BPDCM 26 in order to arrive at a new plandesign. This process may be iterated many times until a survivor benefitplan is designed that precisely meets the employers requirements.

[0040] Once the survivor benefit plan has been designed, data concerningthe plan is downloaded to the Enrollment and Administration Module (orEAM) 28, to implement and manage the plan. The EAM 28 downloadsinformation on the employees to be offered coverage under the plan,benefit levels, contribution amounts, etc., to the Word ProcessingModule (or WPM) 32, which generates individual enrollment forms 36 thatare transmitted to the employees 16. If an employee wants to be coveredby the survivor benefit plan, the employee completes the enrollment form36 by indicating a designated survivor(s), and other information, andsends the completed form 38 back so that the data can be imported intothe SBP Database 24 via the DIM 44.

[0041] In response to receiving the completed enrollment forms 38, theEAM 28 sends a notification 50 to the payroll department of the employer14 so that the proper contribution level (from the employer and/or theemployee) 48 can be transmitted to the trust plan 18 for investment. Thetrust plan 18 is the investment vehicle of the survivor benefit systemof FIG. 1. This trust could be a Voluntary Employee BeneficiaryAssociation (or “VEBA”) trust, as described in §501(c)(9) of the FederalTax Code, or could be a Non-Exempt Trust.

[0042] The purpose of the trust plan 18 is to provide a means forholding the employer/employee contributions 48 to the survivor benefitplan and to invest these contributions so as to provide enough cash-flowand portfolio yield to meet the expected liabilities as modeled by theBPDCM 26. To do this, the plan trustee 40 purchases investments, such asstocks, bonds, etc., and may also purchase insurance contracts 22 as ageneral funding strategy or to cover certain high-risk employees asdetermined by the BPDCM 26 and as provided to the trustee in the planreports 30. These insurance contracts 22 could be stop-loss, permanentlife insurance (fixed or variable), universal life insurance, variableuniversal life insurance, term-life insurance or a combination of thesetypes of insurance issued on an individual or group basis. The trustpays certain premiums for these insurance contracts 22, and when anemployee death occurs, reaps certain proceeds to be used to fund thesurvivor income benefits payable by the plan. If insurance is purchasedon particular high-risk employees, then periodically, such as yearly,data concerning the insurance contracts purchased is provided to theBPDCM 26, and is used as part of the periodic remodeling or redesign ofthe entire survivor benefit plan in order to facilitate ongoingmanagement and optimization of the insurance contracts 22.

[0043] The use of a self-funded trust-based plan provides a majoradvantage over the prior art insurance-based plans. Any investment gainsrealized by the investments made by the trust plan 18 inure to thebenefit of the plan participants, and not to some third party, like theinsurance company. So, if the investment return exceeds the assumedrate, the plan assets and resulting cash-flow are likely to exceed theexpected liabilities as modeled by the BPDCM 26. A potential drawback ofthis investment gain and resulting overfunding of the plan liabilitiesby the trust is that trust income could become subject to UnrelatedBusiness Income Tax (“UBIT”). Therefore, it is desirable to minimizeeither the taxable income to the trust plan whenever trust plan assetsexceed the liabilities of the survivor benefit plan or the excessfunding amount. This can be accomplished in at least three ways: (1) usethe trust assets to purchase life insurance contracts on planparticipants or to purchase tax exempt securities; (2) lowercontribution levels; or (3) raise benefits. The Option (1) purchase oflife insurance policies is particularly attractive since it provides thedual benefit of minimizing tax exposure of the trust plan or employerand at the same time minimizing liability exposure of the plan.Therefore, this is the preferred method of dealing with overfunding ofthe trust plan; options (2) and (3) are alternative methods.

[0044] Once the plan has been put in place, the trust setup, theemployees enrolled and the investment strategy made and implemented, theEAM 28 is then responsible for administering the ongoing aspects of theplan. When the death of a covered employee occurs, the employertransmits a death notification 52 to the EAM 28, which includes theexact amount of any benefit offset to be applied to the survivor incomebenefit payable under the plan to the deceased employee's designatedsurvivor(s). The EAM 28 then calculates the net survivor income benefitand downloads this benefit information to the MPM 34, which manages theactual payment of the periodic income benefits to the designatedsurvivor(s) 20 using monies from the trust plan 46.

[0045] The EAM 28 also stores actual claims data for each deceasedemployee in the SBP Database 24. On a periodic basis, such as yearly,the EAM provides detailed claims reports 56 to the trust plan actuary42. The plan actuary 42 then uses this information 56 to determine thefinancial status of the survivor benefit plan. Also on a periodicbasis—such as annually—the EAM 28 obtains updated employer/employee data12 on electronic media for importation by the DIM 44 into the SBPDatabase 24. This updated information can be used to recalculate orremodel the entire survivor benefit plan based on new data concerningthe covered employees, such as higher salaries, actual mortality data,etc., or based on new plan parameters as provided by the employer. Thisnew data is also used by the EAM 28 to send enrollment forms 36 to newemployees or to employees who have not previously sent in completedenrollment forms 38, as well as to calculate and communicate anyemployer/employee contributions for the upcoming year.

[0046]FIG. 2 sets forth a flowchart of the steps and functionsimplemented by the Benefit Plan Design and Costing Module (or BPDCM) 26.Beginning at step 60, the employer/employee data and plan integrationparameters 12 are retrieved from the SBP Database 24. At step 62, theexpected annual compensation over a period of years is calculated foreach employee, using the employer/employee data from step 60. Then, theBPDCM 26 calculates the employer benefits from other sources to beoffset and integrated into the survivor income benefit at step 64. Thisoffset value is converted to a present value at step 66. At the sametime, the BPDCM 26 calculates the survivor income benefit (or SBPbenefit) for each employee 68 and converts this value to a present value70.

[0047] Although not shown in the flowchart of FIG. 2, step 68 mayinclude several substeps. For example, this step may include thefollowing substeps: (1) identifying each employee in the database 24 towhose survivor(s) a survivor income benefit is to be paid; (2)identifying information necessary to determine a “range” of survivorincome benefits that the system may select to be paid to a particularemployee's beneficiary (this “range” is typically from 10 to 100 % ofthe employee's annual cash compensation); (3) determining a “range” ofsurvivor income benefits for each employee; (4) determining the expectedmortality of each employee (this could be based on a general purposemortality table stored in the SBP Database, or, over time, based upon anemployer-specific mortality table); (5) determining the life expectancyof the designated survivor(s); (6) based on (4) and (5), calculating abenefit payment period for the lifetime of the employee's spouse, or forsome specified number of years (such as 20) for other designatedsurvivor(s); and (6) selecting the survivor income benefit level fromthe “range” calculated.

[0048] At step 72, the BPDCM 26 sums the difference between thecalculated PV survivor income benefit per employee 70 and the benefitoffsets 66 to arrive at a total net present value of SBP benefit. (Ifthe offsets are greater than the survivor income benefit for aparticular employee for a particular period computed in 70, the SPBbenefit becomes zero for that period.) Certain actuarial assumptions arethen made concerning expected mortality, interest rates, etc., and atstep 74, the projected annual cost to fund the expected liability peremployee is calculated for the plan. To this value, the expected planadministration costs are added at step 76. The amount computed at step76 represents the total estimated plan costs for a particular period,such as a year. Once the total costs have been determined, the systemmust then determine the employer and/or employee contribution levelsneeded to meet the predetermined funding level desired by the employer.This predetermined funding level is preferably 100%, but could be lessthan or greater than 100% depending on the needs of the employer.

[0049] At step 78 the system computes an estimation of the requiredemployer and/or employee contributions necessary to meet thepredetermined funding level of the expected plan liabilities or costsfrom steps 74 and 76. At step 80, the estimated contribution levels arecompared to the expected liabilities from step 76 to determine if thecomputed contributions will suffice to meet the predetermined fundinglevel. If the contributions are greater than or equal to thepredetermined finding level multiplied by the costs of benefits expectedto be provided from the plan, then the BPDCM proceeds to step 82. If,however, the contribution levels computed in step 78 are less than thepredetermined funding level multiplied by the expected liabilities ofthe plan, the calculation is reiterated back to step 78, and the steps78-80 are performed again, until the decision step 80 determines thatthe contribution levels last computed at step 78 are sufficient to meetthe predetermined funding level.

[0050] Once a plan has been designed, the BPDCM 26 calculates andprepares plan reports 30 at step 82. These plan reports are transmittedto the employer 10 and perhaps the employees 16, and illustrate theannual SBP contribution levels and survivor income benefit for eachemployee and the expected composite costs for the employer and the plan.The reports 30 may also include the names, ages, gender and the netpresent value amounts for each employee whose survivor income benefit PVexceeds the employer's risk tolerance.

[0051] At step 84, the employer has the opportunity to review and changethe plans parameters. If the employer decides that the plan, as modeled,is too costly, doesn't provide enough benefits, or for any other reasondoesn't like the current structure of the plan, then the SBP systemloops back to step 60, where the process of modeling the plan isreiterated, with any new employer parameters being downloaded from theSBP Database 24.

[0052] If the plan, as modeled, meets the employer's expectations, thenthe BPDCM 26 proceeds to step 86, where the decision is made whether ornot to procure insurance products for the high-risk employees identifiedin the plan reports 30 and/or any other employees. If the employerdesires to procure insurance to cover the high-risk employees and/or anyother employees, then at step 88, the minimum and maximum annual premiumcosts for the insurance contracts for such employees is computed usinginsurance data 90, which is periodically provided to the BPDCM. A planreport 30 is then generated to be sent to the plan trustee 40 so thatthe insurance coverage can be obtained. Once the insurance has beenpurchased, the BPDCM 26 proceeds to step 92, where transfer of thesystem is passed to the EAM 28, which manages the ongoing administrativetasks of the plan.

[0053] Also shown in FIG. 2 is the annual recalculation step 94. The SBPSystem is constructed so that on a periodic basis, such as annually, theEAM 28 obtains updated employer/employee data 12, imports this data viathe DIM 44 into the SBP Database 24, and instructs the BPDCM 26 toremodel or recalculate the survivor benefit plan. The BPDCM 26 thenprogresses through all of the above described steps to arrive at thecurrent year costs and contribution amounts for the plan. Thisinformation is put into the plan reports 30, which are provided to theemployer and subsequently to the employees. Based on this updatedinformation, the employer can then decide whether to change certainemployer parameters and thus redesign the plan prior to distributing theemployees reports. This step reveals the ultimate flexibility of thepresent invention. No known prior art method of providing a survivorbenefit plan includes these computer-implemented steps of periodicallyredesigning and remodeling the plan so that it optimally meets theemployer's and employee's expectations over time.

[0054] Turning now to FIG. 3, a flowchart of the Enrollment andAdministration Module (or EAM) 28 is set forth. The EAM 28 is used bythe computer-implemented SBP system to administer the ongoing operationof the survivor benefit plan designed in the BPDCM 26. As an initialstep, the EAM 28 downloads data from the SBP Database 24 at step 60 andalso from the BPDCM 26 at step 100 and transfers this data to the WPM 32at step 102 in order to generate the enrollment forms 36. Theseenrollment forms are transmitted from the WPM 32 to the employees 16,who complete the forms 38 and transmit them back to the SBP system,where the data from the completed forms 38 is imported into the SBPDatabase 24 using the DIM 44. The EAM 28 then sends a notification 50 tothe payroll department 14 of the employer 10 so that the correctemployer/employee contributions 48 can be transferred to the trust plan18 for investment.

[0055] At step 108, the EAM 28 receives notification 52 from theemployer 10 that a covered employee has died, and also informs the EAM28 as to the exact amount of any other employer selected benefit that isto be integrated into the survivor income benefit provided under theplan. The EAM receives this information at step 110 and calculates thenet SBP benefit to be paid to the employee's designated survivor(s). TheSBP benefit amount, payment period, and survivor(s) information is thenprovided to the Monthly Payment Module (or MPM) 34 at step 112, so thatthe MPM 34 can manage the payment of the survivor income benefit to thedesignated survivor(s) 20.

[0056] For each claim made under the survivor benefit plan, the EAM 28records information and stores this claim data into the SBP Database 24at step 114. On a periodic basis, such as annually, the EAM providesthis claims data to the trust plan actuary 42. The plan actuary 42 usesthis claims information, along with the other plan reports 30, and theperformance of the investments held in the trust 18 to determine thefinancial status and health of the plan. The actuary's analysis can thenbe used in the periodic recalculation or remodeling process to alter theparameters of the plan.

[0057] The EAM includes two additional periodic functions. In step 116,the EAM obtains updated employer/employee data 12 and instructs theBPDCM 26 to perform the periodic (such as annual) remodeling 94 of thesurvivor benefit plan to account for changes in employer parameters,actual plan assets and liabilities, employee data, etc. Thisrecalculation step 94 provides a level of optimization and flexibilityunknown in the prior art.

[0058] A second periodic function enabled by the EAM 28 is set forth instep 118, where the EAM 28 periodically obtains updated insurance dataconcerning the insurance contracts (if any) purchased by the trust plan18 in order to minimize liability and income tax exposure for the plan.This step provides a level of ongoing management and optimization of theinsurance contracts also unknown in the prior art systems.

[0059] Having described in detail the preferred embodiment of thepresent invention, including its preferred modes of operation andfunctions, it is to be understood that this operation could be carriedout with different elements and steps. This preferred embodiment ispresented only by way of example and is not meant to limit the scope ofthe present invention which is defined by the following claims.

What is claimed:
 1. A computer-implemented data-processing method forproviding survivor income benefits to an employee's-designatedsurvivor(s), comprising the steps of: providing a computer system forexecuting the computer-implemented method, the computer system having adatabase for storing information; storing employee and survivor(s)information in the database necessary to calculate a survivor incomebenefit and a benefit payment period for each employee-designatedsurvivor(s) and calculating the survivor income benefit using thisinformation; calculating the net present value of the survivor incomebenefit for each survivor(s); identifying all survivor benefits payableto each employee's-designated survivor(s), from other enumeratedsources, and entering this information into the database; calculatingthe net present value of the survivor benefits payable from othersources for each employee-identified survivor(s); calculating, byprocessing information in the database on the computer system, projectedyear-by-year differences between the present value of the survivorincome benefit payable to each survivor(s) and the present value of thesurvivor benefits payable from other sources to each survivor(s), andstoring this information into the database on the computer system;determining, by processing information in the database on the computersystem, the year-by-year net present value of investment assets whoseportfolio value or investment-resulting cash flow provides cash equalingthe projected difference between each survivor(s)' income benefit andeach survivor(s)' benefits payable from other sources; providing datafrom the computer system so that sufficient investment assets may beacquired or sold to provide necessary year-by-year investment-resultingcash flow and portfolio yield, from contributions made by at least oneof the employer and the employee; making periodic payments to eachsurvivor(s), each payment being proportionate to the survivor incomebenefit divided by the benefit payment period; redetermining annuallythe survivor income benefit, the survivor benefits from other sources,the benefit payment period, the value of investment assets, and thecontributions made by at least one of the employer and employee, andstoring this information into the database; and continuing the periodicpayments to each survivor(s) for a set period of time or until a benefittermination event occurs.
 2. The method of claim 1, wherein the step ofstoring and calculating comprises the steps of: identifying eachemployee to whose survivor(s) a survivor income benefit is to beprovided and storing this information in the database on the computersystem; identifying for each employee information necessary to determinea range of survivor income benefit which may be selected to be paid tothe employee's survivor(s), including but not limited to the employee'sannual cash compensation, employee's gender, birth date, years ofservice with the employer, and, if the employee is married, theemployee's spouse's gender and birth date, and storing this informationinto the database on the computer system; determining for each employeethe range of survivor income benefits available to be paid to theemployee's survivor(s); determining the expected mortality of eachemployee; determining the life expectancy of the spouse of eachemployee, if the employee is married; determining the benefit paymentperiod for each designated survivor(s); and selecting the survivorincome benefit, from the range of survivor income benefits available tobe paid to each survivor(s), to be paid during each designatedsurvivor'(s) benefit payment period and storing the information into thedatabase on the computer system.
 3. The method of claim 2, wherein theredetermining step comprises the steps of: redetermining annually theexpected mortality of each employee; redetermining annually the lifeexpectancy of each employee's spouse; redetermining the benefit paymentperiod for each survivor(s), and storing this information into thedatabase on the computer system; determining, by processing informationin the database on the computer system, any change in the year-by-yearnet present value of investment assets or change in theassets'investment-resulting cash flow, on the annual basis, for eachemployee, whereby a re-determination of sufficient investment assets isenabled and storing this information into the database on the computersystem; determining, by processing information in the database on thecomputer system, any change in availability or amount of survivor'sbenefits from the other sources, on an annual basis, for each employee,whereby a re-determination of the difference between the other sourcesurvivor benefits and the survivor income benefit is enabled and storingthe information into the database on the computer system; and adjustingthe contributions from the employer or employee in view of any change innet present asset value, investment-generated cash flow or survivor'sbenefits from other sources, to maintain the survivor income benefit foreach survivor(s) for the redetermined benefit payment period by thecomputer system sending a control signal to the employer's payrolldepartment so that the contribution can be adjusted.
 4. The method ofclaim 2, wherein the employee-designated survivor(s) are selected fromthe group consisting of the employee's spouse, one or more individuals,or the spouse and or one or more individuals.
 5. The method of claim 2,wherein the range of total survivor income benefits available to theemployee's survivor(s), is from 10 to 100% of the employee's annual cashcompensation, payable in twelve (12) periodic/monthly payments.
 6. Themethod of claim 2, wherein the minimum benefit payment period for thesurvivor income benefit, when the employee has no spouse or theemployee's spouse pre-deceases the employee, is the number of years fromthe employee's death selected by the employer.
 7. The method of claim 2,wherein the minimum benefit payment period for the survivor incomebenefit, when the employee's spouse is the sole selected designatedsurvivor, is the number of years from the employee's death selected bythe employer.
 8. The method of claim 1 further comprising the step ofestablishing a trust to hold title to the investment assets acquired toprovide the necessary investment-resulting cash flow and portfolioyield.
 9. The method of claim 1 wherein at least one of the investmentassets comprises an insurance policy naming the employee(s) as theinsured.
 10. The method of claim 9 wherein the insurance policy isselected from the group consisting of permanent fixed or variable lifeinsurance, universal life insurance, variable universal life, term lifeinsurance, stop-loss insurance, or a combination of such types ofinsurance issued on an individual or group basis.
 11. The method ofclaim 8, wherein the trust is a non-exempt trust.
 12. The method ofclaim 8, wherein the trust is a VEBA trust.
 13. The method of claim 1,further comprising the steps of: constructing a mortality database forthe employer, using mortality experience data specific to the employer,when the employer's historical mortality experience is of sufficientduration and employee population size to provide credible results bycurrent accounting standards, whereby a determination of each theemployee's expected mortality may be determined; and determining theexpected mortality of each employee, by processing information using themortality database.
 14. The method of claim 8, further comprising thesteps of: identifying particular employees whose survivor income benefitexceeds a risk limit established by the employer; purchasing a lifeinsurance policy for each such employee; and using the insuranceproceeds of the life insurance policy as an investment asset or as cashflow to provide survivor income benefit payments.
 15. A computer systemfor designing and administering survivor benefit plans, the systemcomprising: a database for storing employer and employee informationneeded to design the plan; data import module (DIM) for receiving theemployer and employee information and for importing the information intothe database; a benefit plan design and costing module (BPDCM) fordesigning a model of the survivor benefit plan using the employer andemployee information stored in the database, the model includingcalculations of survivor income benefit levels and payout periods foreach employee's designated survivor(s) and calculations of contributionlevels on the part of the employer and/or employees necessary to fundthe plan to a predetermined funding level; an enrollment andadministration module (EAM) for implementing the plan and administeringthe contribution levels and periodic payout of survivor income benefitsto and from the plan; and an investment vehicle for holding thecontributions made by the employer and/or employees.
 16. The computersystem of claim 15, further comprising: a word processing module (WPM)for receiving enrollment information from the EAM and for generatingenrollment forms to be sent to the employees who may be covered underthe plan.
 17. The computer system of claim 16, wherein the employees whodesire coverage under the plan complete the enrollment forms which arethen imported into the system using the DIM.
 18. The computer system ofclaim 15, further comprising: a monthly payment module (MPM) forreceiving survivor income benefit information from the EAM and forperiodically providing payments under the plan to the employee'sdesignated survivor(s).
 19. The computer system of claim 18, wherein thesurvivor income benefit information includes a survivor income benefitpayment, a benefit payment period, and the name and address of thedesignated survivor.
 20. The computer system of claim 15, wherein theDIM converts the employer and employee information into an ASCII recordfor storage in the database.
 21. The computer system of claim 15,wherein the BPDCM comprises: means for calculating the expected annualcompensation per annum of each employee; means for calculating the netpresent value (NPV) of the survivor income benefit for each employee;summing means for calculating the total survivor income benefits for theplan; means for projecting the annual plan cost for each employee;summing means for calculating the expected annual total plan cost,including expected administrative costs; and means for determining arequired employer and/or employee contribution level to fully fund theexpected annual total plan cost to the predetermined level.
 22. Thecomputer system of claim 21, wherein the BPDCM further comprises: meansfor calculating the PV of benefits provided by the employer other thanthe survivor income benefit on the death of the employee; and means forsubtracting the PV of the other employer benefits from the PV of thesurvivor income benefit for each employee prior to summing the totalsurvivor income benefits for the plan.
 23. The computer system of claim21, wherein the BPDCM further comprises: means for recalculating theexpected annual total plan cost and the required employer and/oremployee contribution level.
 24. The computer system of claim 21,wherein the BPDCM further comprises: means for generating plan reportsthat detail the expected annual total plan cost and the requiredemployer and/or employee contribution level.
 25. The computer system ofclaim 24, wherein the plan reports are provided to the employer, and theemployer can then change certain employer data or parameters regardingthe plan, which is stored in the database.
 26. The computer system ofclaim 25, wherein the BPDCM further comprises: means for redesigning thesurvivor benefit plan using the changed employer data or parametersstored in the database.
 27. The computer system of claim 15, wherein theBPDCM further comprises: means for determining whether certain employeesare high-risk individuals, indicating that the survivor benefit for thecertain employees exceeds an employer designated risk threshold; meansfor calculating the minimum and maximum annual premium cost forinsurance contracts to cover the high-risk and other employees; andmeans for generating plan reports that indicate the high-risk and otherindividuals and the costs of their insurance.
 28. The computer system ofclaim 15, wherein the investment vehicle is a trust fund having atrustee that manages the assets of the trust.
 29. The computer system ofclaim 28, wherein the trust fund is a VEBA trust.
 30. The computersystem of claim 28, wherein the trust fund is a non-exempt trust. 31.The computer system of claim 27, wherein the investment vehicle is atrust fund having a trustee that manages the assets of the trust. 32.The computer system of claim 31, wherein the plan reports that indicatethe high-risk individuals and the costs of insurance are provided to theplan trustee who purchases insurance contracts covering the high-riskemployees.
 33. The computer system of claim 32, wherein the insurancecontracts are selected from the group consisting of permanent fixed orvariable life insurance, universal life insurance, variable universallife, term life insurance, stop-loss insurance, or a combination of suchtypes of insurance issued on an individual or group basis.
 33. Thecomputer system of claim 21, wherein the means for calculating the netpresent value (NPV) of the survivor income benefit for each employeecomprises: means for identifying each employee to whose survivor(s) asurvivor income benefit is to be provided and for storing thisinformation in the database on the computer system; means foridentifying for each employee information necessary to determine a rangeof survivor income benefit which may be selected to be paid to theemployee's survivor(s), including but not limited to the employee'sannual cash compensation, employee's gender, birth date, years ofservice with the employer, and, if the employee is married, theemployee's spouse's gender and birth date, and storing this informationinto the database on the computer system; means for determining for eachemployee the range of survivor income benefits available to be paid tothe employee's survivor(s); means for determining the expected mortalityof each employee; means for determining the life expectancy of thespouse of each employee, if the employee is married; means fordetermining each designated survivor'(s) benefit payment period, and forstoring this information into the database on the computer system; andmeans for selecting the survivor income benefit, from the range ofsurvivor income benefit available to be paid to each survivor(s), to bepaid during each designated survivor'(s) benefit payment period and forstoring the information into the database on the computer system. 34.The computer system of claim 15, wherein the EAM comprises: means forperiodically obtaining updated employer and employee information and fordirecting the DIM to import the updated information into the database;and means for recalculating the survivor benefit plan based on theupdated information obtained from the employer and employees.
 35. Thecomputer system of claim 16, wherein the EAM comprises: means fordownloading information from the database and from the BPDCM and fortransferring this downloaded information to the WPM so that it cangenerate the enrollment forms.
 36. The computer system of claim 15,wherein the EAM comprises: means for notifying the employer of thecontribution levels required for each employee as determined by theBPDCM.
 37. The computer system of claim 36, wherein the employer'spayroll department includes means for receiving the contributionnotification and means for transmitting contribution funds to theinvestment vehicle for each employee.
 38. The computer system of claim15, wherein the EAM comprises: means for receiving a death notificationfrom the employer indicating that a particular employee covered by theplan has died, the death notification including the amount of any otheremployer benefits to be integrated with the survivor income benefitprovided by the plan.
 39. The computer system of claim 38, wherein theEAM further comprises: means for downloading survivor income benefitinformation to the MPM so that the MPM can provide the periodic paymentsto the designated survivor(s).
 40. The computer system of claim 39,wherein the EAM further comprises: means for collecting and storingclaims data for each deceased employee in the database.
 41. The computersystem of claim 40, wherein the claims data is used to construct amortality database specific to the employer, which is stored in thedatabase, and which may be used by the BPDCM to recalculate the survivorbenefit plan.
 42. The computer system of claim 40, wherein the claimsdata is periodically transmitted to a plan actuary associated with theinvestment vehicle in order to assess the financial status of thesurvivor benefit plan.
 43. A computer-implemented method of designingand administering a self-funded survivor benefit plan comprising thesteps of: importing employer and employee data into a database;designing a survivor benefit plan using the data in the database, thedesigned plan including calculations of survivor income benefit levelsfor each employee's designated survivor(s), the expected annualliabilities of the plan, and the required contribution levels to fundthe plan to a predetermined funding level; implementing the plan bysending enrollment letters to the employees and receiving completedenrollment forms for those employees who desire coverage under the plan;notifying the employer of the contribution levels for those coveredemployees; transferring the contributions to a trust fund; receiving adeath notification from the employer when a covered employee has died;and providing a periodic payment stream to the employee's designatedsurvivor(s) based on the calculated survivor income benefit level.